The administration of Prime Minister Yoshihide Suga has set sail with a banner of inheriting the “Abenomics” economic policy promoted by the previous government led by his predecessor Shinzo Abe.
While Japan has experienced the worst economic contraction since the end of World War II due to the coronavirus pandemic, stock prices have maintained 20,000 yen (about $190) levels. Market players are apparently expecting that the Suga administration will continue with fiscal stimulus measures and monetary easing.
However, we must not overlook the problems left by the Abenomics policies and be dazzled by high share prices. In particular, the widening economic gap in Japan needs careful attention.
Although the Abe administration highlighted the improvement in the job market under its rule, it mostly created non-regular jobs with low wages and poor working conditions. Issues underlying the Abenomics doctrine were aggravated further once the nation was hit by the coronavirus crisis.
The number of non-regular employees in Japan dropped by a record 1.31 million in July. Even after economic activities were resumed following a coronavirus-led hiatus, the nation has seen a sluggish economic recovery, taking a toll on those in vulnerable positions. The government must not leave these circumstances unaddressed.
When the gap between the rich and poor widens, the middle-class population dwindles, undermining stable foundations for economic growth. The new administration is urged to take swift measures to reduce economic disparities.
Prime Minister Suga has raised a basic national slogan of “self-reliance, mutual aid and public assistance.” Of these three principles, Suga appears to attach importance to self-reliance. His way of thinking represents a strong inclination toward neoliberalism that puts emphasis on competition and efficiency, which could further widen economic disparities.
Suga also laid out a policy to promote digitalization, which is apparently aimed at boosting economic efficiency and facilitating post-pandemic economic growth. If productivity alone is prioritized, however, small- and mid-sized businesses as well as regional areas could be left behind while major companies would gain benefits.
In order to redress the economic disparities, it is imperative to secure solid foundations for the social security system.
Japan’s social security spending has swelled amid the aging population, with most of the resources relying on public debt. The Abe administration repeatedly raised national debt as part of economic stimulus measures even since before the coronavirus pandemic, resulting in total debt amounts topping 1.1 quadrillion yen — or 1,100 trillion yen ($10.49 trillion).
We are left with a growing sense of fear over whether Japan can survive with its super-aging society. Even though the nation is going through the coronavirus crisis, the government must not bloat fiscal spending in an irresponsible manner.
During the ruling Liberal Democratic Party’s leadership election, Suga referred to the possibility of raising the consumption tax from the current 10% if he took office. The following day, he modified his remarks by stating, “I share the same view with (then) Prime Minister Shinzo Abe, who said that (a consumption tax hike) would not be necessary in the next 10 years.”
Discussions on raising the public’s burden cannot be avoided without reviewing nonurgent and nonessential government projects. The more such moves are delayed, the heavier the load future generations will have to shoulder. It serves Japan no good for the new government to take over the Abe administration’s habit of procrastinating about challenges the nation faces.